Private equity behind large healthcare bankruptcies in 2024

Private equity was part of most large healthcare bankruptcies in 2024, according to new research from the Private Equity Stakeholder Project.

PESP reported that seven of the eight largest healthcare bankruptcies had a history of a private equity backer. These large bankruptcies involved organizations with at least $500 million in liabilities.

Private equity played a disproportionate role in healthcare bankruptcies. The research showed private equity-owned companies accounted for 11% of all U.S. corporate bankruptcies last year, even though private equity played some role in at least half of all large corporate bankruptcies during 2024.

In healthcare, though, private equity-backed companies specifically accounted for 21% of all healthcare bankruptcies in 2024. This percentage did not decrease between 2023 and 2024 despite overall healthcare bankruptcies going down last year.

The new research was published as part of a new tracker of U.S. bankruptcies involving companies in which private equity firms have a controlling stake at the time of bankruptcy or since 2020. PESP said private equity firms have "demonstrated overreliance on cost-cutting measures and aggressive financial policies that have limited long-term prospects as they pursue short-term profits."

Prioritizing immediate financial gains can result in mismanagement and economic instability, contributing to growing bankruptcy rates among private equity-backed companies. Healthcare bankruptcies are also "especially devastating to consumers and may leave people without access to essential care," PESP stated.

Formerly owned by a private equity firm, Steward Health Care filed for Chapter 11 bankruptcy in May 2024 in the largest hospital sector bankruptcy in several decades. The hospital operator was one of the largest private for-profit hospital operators in the U.S., with 31 hospitals under its umbrella at the time of filing. Private equity firm Cerberus Capital Management transferred ownership of Steward's hospitals to the company's physicians in May 2020.

Other large 2024 healthcare bankruptcies with private equity involvement included Consulate Health Care (LaVie Care Centers), Cano Health, ProSomnus Inc., Atlantic Neurosurgical Specialists and Prime Plastic Surgery Associates.

“As private equity’s footprint continues to grow in nearly every sector of the economy, the industry’s role in over half of large bankruptcies raises pressing questions for policymakers, investors, and consumers,” said Valentina Dabos, senior campaign and research coordinator at PESP and lead author of the tracker. “In healthcare, the consequences can be life-altering. Bankruptcy-driven closures or cost-cutting measures leave patients without reliable access to care, disrupting treatment plans and jeopardizing lives.”

Jacqueline LaPointe is a graduate of Brandeis University and King's College London. She has been writing about healthcare finance and revenue cycle management since 2016.